Sunspots by Susan

Are You Tired of Hearing Real Estate Doom and Gloom?

2008-02-27T12:25:00.000-08:00

I haven't posted for awhile, but I'm back! I have continued to write my monthly column for the Sacramento Union newspaper, trying to present the more positive facts about the real estate market, and here is my most recent column, in the February 22 issue:

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Are You Tired of Hearing Real Estate Doom and Gloom?
By Susan Neal, Real Estate Broker and Realtor
Sacramento Union Real Estate Writer

You can't avoid it. Every day the newspapers and television reporters relate bad news about the housing market, and there is no doubt that the national market over-all has felt different from how it looked in 2005, but those who are experienced in real estate and familiar with regular economic cycles are not as concerned as the media hysteria would suggest. To a large extent, it is difficult to determine whether market conditions are driving the media or if the constant barrage of bad news selectively reported in the media is negatively impacting the market. Many believe that the media has certainly affected perceptions. It is time to consider some solid evidence that contradicts all the doom and gloom.

According to Richard F. Gaylord, 2008 president of the National Association of Realtors (NAR), it is important to remember that real estate is a long-term investment. That is how it has traditionally been considered, but "the boom created a misconception that real estate is a high yield, short term investment. It's not." Gaylord adds, "Regardless of where we are in a cycle, there are always plenty of people ready to buy and sell. In fact 2007 existing home sales surpassed those of 2002 - then a record-breaking year." Bad news should be put in perspective.

Foreclosure is terrible, and a tragedy to someone going through it, but when the media talks about "foreclosure spikes," they should provide context. According to NAR statistics, the foreclosure problem is predominantly with sub-prime loans, which are held by less than ten percent of homeowners. And not all sub-prime loans are in trouble. Only a percentage of troubled loans on which foreclosure is started are actually foreclosed on. The true foreclosure rate on prime loans is just 0.6 percent, according to Gaylord.

Great opportunities exist right now for investors as well as for people buying a family home, and lower prices enable more first time buyers to find affordable homes. Buyers and sellers need professionals who are committed and professional to advise them and assist them with taking advantage of today's market.

Donna Fox, Branch Manager of Eagle Home Mortgage in Gold River, says that now is the time for buyers to act. "If people don't take advantage now, the market is liable to turn," says Fox. But she also advises, "Don't let someone push you into a loan that you can't afford over the long haul. If you are considering buying a home, sit down with a reputable lender and find out what programs are available and what you can afford. Then you can feel confident that you will be able to make a solid offer on the home you choose without getting yourself into financial trouble."

A recent issue of Forbes Magazine had a list of markets where home values were up at the end of 2007, including nine metro areas with percentage increases in double digits. While Sacramento County was not on their top ten list, agents throughout the county are experiencing increased activity at open houses and buyer excitement and enthusiasm is multiplying. More Realtors are reporting that they are receiving multiple offers on properly priced properties. The boom of a few years ago was an anomaly and for the last year, prices have been correcting, but those who bought more than three years ago are still making a profit on their sales. The correction appears to be ending, however, and there is no time like the present to get great deals and financing that is still available at low rates.

NAR is forecasting that the real estate market will stabilize in the second quarter and rise throughout the second half of the year. According to NAR, the median home price for existing homes declined just 1.7 percent in 2007 (although admittedly some markets experienced more or less than that).

In Sacramento County, the median home price in September 1997 was $119,000. It climbed to $140,000 in 1999 and $154,000 in 2000. In September 2001 there was another rise to $180,000, but in the next four years prices rocketed to $385,000! This corrected to $307,000 by September 2007, but those who have owned their homes for 5-10 years have still made an incredible profit. For the most part, it is only those who bought at the market's peak in 2005 who are actually experiencing a loss, and even then only if they must sell now or if they obtained a loan that put their equity at risk.

Leslie-Appleton Young, Chief Economist for the California Association of Realtors (CAR), expects the worst of the California foreclosures to hit during the first part of this year, as most of the sub-prime rates will have adjusted, placing more homeowners in a position of straining to make the higher monthly payments. However, with reduced interest rates, increases in conforming loan limits included in the new economic stimulus package and Congress working on other plans to help those in danger of foreclosure, many of the anticipated foreclosures may be averted.

Most lenders are also more willing than ever right now to work with borrowers. They would rather not foreclose if they can avoid it, but they must also protect the liquidity of their institutions, so it is important to start investigating your options before you get into desperate a situation. If you do not feel that your current lender is willing to work with you, meet with another lender to see if refinancing is a better option. Do not wait until you are in foreclosure to ask for assistance. You would be surprised what help is available if you will just ask.

And keep in mind that if you are a seller who is disappointed in the price at which your current home must be listed, you will likely be moving into another home which will also be priced lower than it would have been a couple of years ago, and your interest rate on the new home will likely be lower than you are now paying, so you are not actually suffering the loss that you may perceive.

Since the housing slowdown began in the second half of 2005, the economy has added some 4 million net new jobs, wages have grown by 8 percent and interest rates have lowered. Things are getting better in many other parts of the economy and the housing market is heading back to normal. Buy now, before the next boom cycle, and you will be one of those investors who profits most from your real estate. Sell now if you are thinking of moving, and you can take advantage of a great opportunity as well. Consult with your Realtor as to how to present your home to get the highest price and how to purchase your new home at the lowest price. Speak with a reputable lender to learn your best financing options. And ignore the doomsayers!

Susan Neal is a broker with Century 21 Noel David Realty in Fair Oaks. She can be reached at (916) 705-8951 or www.SusanNealFineProperties.com. This article is not intended to give legal or tax advice, and you should consult your attorney or financial advisor for additional information.

2007-09-20T21:06:00.000-07:00

Today I had to give two fellow realtors some harsh feedback on their listings. After the Orangevale Realtors meeting on Tuesday, we toured 10 homes, after which some of the listing agents requested feedback. Most of the homes were very nice and well staged so that they showed very nicely. Unfortunately there were a couple of homes that looked nice inside, but I won't be showing either of them to any of my buyers.

One was obviously the home of smokers. And it didn't just smell bad -- it was the strongest smelling home I had ever been in. It made my eyes water and I could only stay inside for a short time before I had to get some air. The listing agent says she has warned her sellers about it, but they apparently still smoke inside, so they might not be all that motivated to sell.

The other home looked lovely inside, but it was clear looking around the exterior that there are some structural issues that someone had made a half-hearted effort to address, but some of what they had done just called attention to the problems. I wouldn't show this home unless a whole-house inspection indicated that the problems were only cosmetic or if they were professionally corrected.

I like it better when I can give glowing feedback, but honesty is what the listing agents want and need, so that is what a try to give. I wish sellers could understand how important it is to make their house irresistible to buyers instead of thinking they can force buyers to accept their house with all its defects without taking them into consideration in the pricing. A defective or unattractive home simply will not sell unless it is practically given away. And that seller is often the one who will blame their agent when it isn't sold right away. Sigh!

Thanks for the thanks!

2007-09-18T21:29:00.000-07:00

Last night and today were very gratifying. I received calls from several realtors who had read my article in the Union and wanted to thank me for writing such a positive piece about real estate instead of the overstated negative view that is constantly spouted from the other newspaper in the area.

I do believe that real estate is, has been, and will always be a great investment, and facts and figures will bear that out, in spite of price and market fluctuations from month to month. It is immature and unsophisticated to whine and predict doom every time there is a price downturn. It will go back up, and the downs are never as much as the ups, so over several years, there is nearly always a gain.

Anyway, I was happy to hear from people who felt encouraged by my article.

Chicken Festival was great!

2007-09-17T08:44:00.000-07:00

I had planned to spend just about 3 hours at the Chicken Festival, which was in front of our office, but it was so much fun and I met so many nice people that I wound up staying until after 6pm. It made for a long day since I had gotten there before 8am to set up a table in front of the office with free stuff to hand out: newspapers, open house lists, magazines, maps, candy and other stuff. The music was great too: especially the Knucklehead Band and Mumbo Gumbo. I don't know how many people were there - perhaps 10,000 - but all were well behaved, and even the chickens seemed to have a good time. Mark your calendar to watch for the third annual festival next September!

I write for the Sacramento Union

2007-09-12T20:43:00.000-07:00

With the reorganization of the real estate section of the Sacramento Union and a determination by the Union to enlarge the section and present a more positive and realistic picture of the real estate market, I have been invited to write a regular column for the paper.

Because of my schedule, my contributions will not be weekly, as least for now, but I have committed to at least once a month. The September 14 issue has an article by me, and I'm very pleased to be a part of the Sacramento Union family.

Pretty exciting when you think about the fact that Mark Twain started his writing career as a writer for the Sacramento Union!

9/11

2007-09-11T22:27:00.000-07:00

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I can't let this day go by without taking a moment to remember those who died on September 11, 2001, as well as those they left behind, all the people injured, and everyone affected, which I think is all of us. I have watched some of the memorial events on TV and the terror of that day came back as if it had been yesterday.
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Chicken Festival

2007-09-11T22:03:00.000-07:00

This Saturday September 15 is the 2nd annual Fair Oaks Chicken Festival in Fair Oaks Village, in and around the park. Center of the action will be the intersection of Fair Oaks Blvd and California Ave.

There will be Craft Fair, Food Vendors, Dancing, Beer Tasting, Live Music, Kid's Activities, Chicken Dinner, Cooking Demonstrations & Wine Pairings, and admission is FREE!

The Fair Oaks Chicken Festival is a celebration of our rural history and present village atmosphere. The Village of Fair Oaks, colonized around 1895, was home to orange and citrus groves as well as olive orchards and assorted farm animals—and, without a doubt, chickens were among them.

Here is a quote from the Chicken Festival website:

"Today the Fair Oaks chickens enjoy the freedom and hospitality of the village they call home. They, along with their human counterparts, attend the Thursday night summer concerts in the park. They can be found “crowing” their appreciation for a good performance at the Fair Oaks Theatre Festival. They gather in front of the local pub and other village businesses and even “drop in” for a bite with diners on the patio of one of Sacramento County’s better known restaurants. They have been the subject of television and radio stories as well as local newspaper and magazine articles. In short, they are a part of our history and lore—and love ‘em or curse ‘em—they are a very real part of everyday life in the village they call home.
"In 2006, we celebrated our chickens and our village with the First Annual Fair Oaks Chicken Festival and the results were astonishing! How were we to know that our chickens would prove to be so popular?
The Fair Oaks Recreation and Park District estimated that 8,000 people attended this one day event last September!"

For more information, see: http://www.fairoakschickenfestival.com/index.php

30-Year Mortgages Fall to Lowest Rate in 3 Months

2007-09-04T18:07:00.000-07:00

I thought this was an interesting article to share - It's a great time to buy:

30-Year Mortgages Fall to Lowest Rate in 3 Months

Borrowing costs on home loans dipped to a three-month low this week, providing much-needed relief to home buyers who are facing a tight lending climate.

Freddie Mac reported a drop in the 30-year fixed rate to 6.45 percent from 6.52 percent a week earlier, while interest on 15-year fixed loans slipped to 6.12 percent from 6.18 percent.

Adjustable-rate mortgages, however, moved in the opposite direction. The five-year ARM settled at 6.35 percent for the week, up a notch from 6.34 percent a week ago; and interest on one-year ARMs averaged 5.84 percent compared to 5.6 percent.

Source: Baltimore Sun (08/31/07)

2007-08-27T21:41:00.000-07:00

My name is Susan Neal and I hope you will enjoy my blog and find it informative. With my many years of experience both as a real estate attorney and a real estate broker and Realtor, I hope that I can present some fun and interesting information. Let me know if you have any real estate questions, and I will try to address them in future posts. Thanks for reading!

Real Estate Remains a Strong Investment

2007-08-27T21:15:00.001-07:00

Opportunities to make big, quick profits in residential real estate tend to come and go in cycles. When a local market is hot, families may find it possible to buy a house at an attractive price, fix it up, and watch its value rise in just a few years.

When the same local market is at the low end of the appreciation cycle, reaping a profit on the family home can take a good deal more time but the reward can be just as satisfying if price and location and carefully considered.

Even in uncertain economic times like these, history shows that real estate is one of the soundest investments a family can make. During the Great Depression of the 1930s when the stock market plummeted as much as 89 percent, housing prices dropped only 39 percent. According to most of the research on housing trends, prices continually stay at the same level as, and most often appreciate faster than, the rate of inflation. Housing prices actually rose an average of 10 percent during the recessions of the mid-1970’s and early 1980s.

CENTURY 21 statisticians report that the rate of home appreciation since 1990 has been around five percent nationally, with inflation hovering around four percent. Homeowners, obviously, are still staying ahead in the real estate game on average.

And, with mortgage interest rates the lowest they’ve been in two decades, real estate today is a more attractive investment than it’s been in years.

First-time buyers are the big winners in this environment. Drawing up a budget can help you and your family decide on what you can afford. Once you’ve determined a price and picked your desired community, shop around to find the best house you can buy for your money. This strategy can help you realize greater appreciation two or three years down the road.

This is also a good time to purchase a second or vacation home. A bargain cabin in the woods today might bring an excellent return when housing prices move upward. Affordable second-home prices also allow you to purchase a vacation home that can serve as a stepping-stone to a larger retreat in the future.

But appreciation isn’t the only advantage to buying a home. The federal government thinks home ownership is so important to the future of our country that it allows mortgage interest to remain the last substantial tax shelter for families. Owners can also take deductions on their property taxes. And, the profit on the sale of your home remains tax free as long as you buy a house for a greater or equal price.

So before you decide that this is not a good time to invest in residential property, re-examine the financial benefits of owning your own home and put them to work for you.